Britain’s economy will not go anywhere near a recession despite gloomy predictions after the Brexit vote, credit rating agency Moody’s has said.
The agency said the impact of Britain leaving the European Union (EU) will be less severe than expected, while the global economy as a whole is stabilising.
They predict the UK economy will grow by 1.5 per cent this year and 1.2 per cent next year, still representing a slowdown, but nowhere near the disastrous recession the ‘Remain’ campaign predicted.
The weakening of the pound in the wake of the vote has helped support economic growth, Moody’s added, while the government will likely increase spending to boost GDP.
Senior analyst Madhavi Bokil said: “Uncertainty around the future of the economy outside the common market will continue to dampen business investment and consumer spending, as businesses hold back on hiring and making long-term investments, and as consumers postpone large spending decisions.
“However, the fall in the sterling will mitigate some of the negative effect in the short term by providing a boost to exports. Our baseline growth forecasts also incorporate the assumption that some fiscal loosening and monetary policy accommodation will support the economy, eurozone limiting the slowdown in growth.”
Moody’s also does not expect a major fall in house prices, despite warnings from former Chancellor George Osborne in the run up to June’s referendum.
Last month, it was reported that foreign investment in Britain rose eight times following the Brexit vote, with 60 transactions totalling $34.5 billion struck by foreign companies for British firms since June 23, compared with 79 deals amounting to just $4.3 billion in the month leading up to the vote.
Official data last month also showed the UK economy picking up speed in the period leading up to the vote, with the biggest increase in industrial production since 1999.
GDP rose by 0.6 per cent in the second quarter of 2016, compared to 0.4 per cent in the first. Meanwhile, output in the second quarter was up by 2.2 per cent compared to same period last year.